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'Joburg can't verify finances'

Article By: Karl Gernetzky

Mon, 25 Feb 2013 7:44 AM

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Bleak findings by the auditor-general on the City of Johannesburg indicate that the metro is incapable of verifying basic financial information, which is crippling service delivery, the Democratic Alliance (DA) says.

Mayoral committee member in charge of finance Geoff Makhubo tabled the audit findings last month, admitting that the city was the only metro out of eight in SA to have received a qualified audit — for the third consecutive year.

The DA said at a press briefing on the audit findings on Thursday that the metro had missed 89 percent of its own 579 performance targets. The audit’s findings had been presented to the metro’s finance committee this week.

DA finance spokesman for the City of Johannesburg Patrick Atkinson said on Thursday that the audit opinion had regressed from 2010-11, and that the metro had been lucky to escape an adverse audit opinion.

"The fact of the matter is that when a city cannot account for its money, cannot manage its revenue, cannot bill properly and cannot pay service providers on time, it cannot deliver services," the DA said in a statement.

The auditor-general’s findings for 2011-12 showed, among other things, that the technical and nontechnical loss of water and electricity in Johannesburg exceeded R2bn for the first time — a loss of 32 percent and 17 percent of revenue respectively. With regard to its billing crisis and nonpayment of services, the city had to classify R12.9bn in debtor revenue as "unlikely to materialise".

This represented 68 percent of the debt owed by ratepayers, DA caucus leader Mmusi Maimane said on Thursday.

The metro had also overcharged residents for refuse removal services by R258m, while refuse collection utility Pikitup registered a deficit of R336m in 2011-12. Pikitup’s debts exceeded its assets by R323m, and a bail-out for the utility may be looming, said DA spokesman for public accounts John Mendelsohn.

The auditor-general pointed to R130m in "ghost assets" — so called because they did not exist — and noted that the metro had underspent its capital budget by R143m.

Speaking on the report last month, Mr Makhubo acknowledged that difficulties were faced in billing ratepayers for services, but he insisted that the finances of the city were "stable".

Among the positives highlighted by Mr Makhubo was that the City of Johannesburg had made a R5bn profit — after deductions — compared with R3bn in 2011, and that rating agencies Fitch and Moody’s Investor Services had given the metro a stable rating.

Mr Atkinson said on Thursday that despite Mr Makhubo pointing to a positive cash balance of more than R4bn, the City was repaying service providers, on average, within 159 days — more than five times the prescribed 30-day period.

The City of Johannesburg’s finance department was unable to comment by the time this article went to print.